On Friday, CAR announced that the Commissioner of Insurance has disapproved of the proposed changes to MAIP Rules 29 and 30. The changes were filed with the Commissioner of Insurance on February 21, 2012 and are outlined in Bulletin No. 957. In the Commissioner’s letter to CAR, which can be viewed in Bulletin No. 961, the Commissioner explained the reasons behind his decision:
Re: Proposed Changes to MAIP Rules 29 and 30
Dear Mr. Judson:
On February 15, 2012, the Governing Committee of the Commonwealth Automobile Reinsurers (“CAR”) voted to amend Rules 29 and 30 of the Massachusetts Automobile Insurance Plan (“MAIP”). On February 21, 2012, CAR submitted these proposed rule changes to the Division of Insurance (“Division”). The proposed amendments address the following issues:
- the waiver of the pre-inspection requirement if a risk is unable to obtain replacement coverage at the end of his/her three-year MAIP assignment period and is assigned to another Assigned Risk Company (“ARC”) (Rule 29.D.2); and
- procedures for ARC’s to follow in the event they insure MAIP assigned policies with an Assigned Risk Producer (“ARP”) who is decertified by CAR and who is no longer able to place business through the MAIP (Rule 29.D.4 and Rule30.B.4.j). I have carefully reviewed CAR’s proposed amendments and, for the reasons set forth below, I am disapproving these proposals.
Waiver of Pre-inspection Requirement (Rule 29.D.2)
I have no objections to CAR’s proposed change (sic) Rule 29. D.2 except that such changes were submitted to the Division in a version of Rule 29 that is no longer current. If the proposed amendments regarding waiver of the pre-inspection requirement are resubmitted to the Division using the current version of Rule 29, I will approve them, provided the waiver is made only if the insured vehicles are the same as the vehicles covered under the previous policy.
Policy Assignments from Decertified ARPs (Rules 29.D.4 and 30B.4.j)
CAR proposes to amend Rule 29.D.4 by adding new language that would permit an ARC to issue a notice of non-renewal to a policyholder if the policyholder’s ARP of record has been decertified under Rule 31.D and the policyholder has not obtained replacement coverage. CAR states that even though the number of policies affected by decertified ARPs* is small, it is necessary to allow the ARC to non-renew the policy prior to the expiration of the three-year assignment period required by current Rule 29.D.1 because some ARC’s are not fully equipped to service individual policyholders.
This reasoning does not appear to be entirely consistent with new language CAR proposes for Rule 30.B.4.j., which details the general duties of the ARC for handling these policies. Under proposed Rule 30.B.4.j, an ARC is required to notify affected policyholders of the interim process they will need to follow with the company for sending payments or making policy changes until the end of the current policy term. The rule further provides that if the ARC receives notices of an ARP’s decertification less than 61 days prior to the end of a policy’s term, the ARC must renew the policy for another full year. This proposal is inconsistent with any alleged inability of and ARC to service these policies for one or possibly two additional years until the original assignment period expires.
These proposed rule changes also place an unnecessary burden on the approximately 100 clients of the currently decertified ARPs. Forcing these policyholders to find replacement coverage prior to the end of their three-year assignment period will require them to produce a down payment that might be as much as 50% higher than the down payment that they would have been required to pay if their policy was renewed with their current ARC. For this reason, I am disapproving the proposed changes to Rules 29.D.4 and 30.B.4.j.
Because CAR is the entity that decertifies an ARP, CAR has a responsibility to notify both the ARC and the ARC’s policyholders associated with the decertified ARP that the decertification has occurred. The notice to the ARC should address such things as commission payments. The notice to the affected policyholders should outline interim payment and service procedures with the current ARC that result from the ARP’s decertification. These notices also should offer direct assistance to the policyholders if they would like to find a new ARP, as well as inform the current ARC of any new ARP of record selected by the policyholder for the purpose of future commission payments. To this end, I ask CAR staff to work directly with Division staff to develop these communications, and to submit a report to the CAR Governing Committee and to me concerning the continued coverage through the MAIP of the policyholders of the currently decertified ARPs, by July 1, 2012.
Sincerely,Joseph G. Murphy Commissioner of Insurance
*CAR has decertified five ARPs to date.